METRO CONCAST STEEL CORP.

, et al vs ALLIED BANK CORPORATION - CANDIA

FACTS:

On various dates and for different amounts, Metro Concast, a corporation duly organized and existing under and by virtue of
Philippine laws and engaged in the business of manufacturing steel, through its officers obtained several loans from Allied Bank.
These loan transactions were covered by a promissory note and separate letters of credit/trust receipts.

Petitioners failed to settle their obligations under the aforementioned promissory note and trust receipts, hence, Allied Bank, through
counsel, sent them demand letters, all dated December 10, 1998, seeking payment but to no avail. Thus, Allied Bank was prompted
to file a complaint for collection of sum of money against petitioners before the RTC.

The petitioners purported that the economic reverses suffered by the economy and the devaluation of the peso against the US dollar
contributed to the downfall of the steel industry, directly affecting the business of Metro Concast and eventually leading to its
cessation.

Petitioners offered the sale of Metro Concast’s remaining assets, consisting of machineries and equipment, to Allied Bank, which the
latter refused. Instead, Allied Bank advised them to sell the equipment and apply the proceeds of the sale to their outstanding
obligations. Petitioners offered the equipment for sale, but there were no takers, and it was reduced into scrap metal.

Peakstar Oil Corporation (Peakstar), represented by one Crisanta Camiling (Camiling), expressed interest in buying the scrap metal.
A Memorandum of Agreement dated November 8, 2002 (MoA) was drawn between Metro Concast, represented by petitioner Jose
Dychiao, and Peakstar, through Camiling, under which Peakstar obligated itself to purchase the scrap metal.

Unfortunately, Peakstar defaulted on all its obligations under the MoA. In this regard, petitioners argue that their loan obligations to
Allied Bank had already been extinguished due to Peakstar's failure to perform its own obligations to Metro Concast pursuant to the
MoA. Petitioners classify Peakstar's default as a form of force majeure in the sense that they have, beyond their control, lost the
funds they expected to have received from the Peakstar (due to the MoA) which they would, in turn, use to pay their own loan
obligations to Allied Bank.

ISSUE: Whether or not Peakstar's breach of its obligations to Metro Concast arising from the MoA can be classified as a fortuitous
event?

RULING: No.

Peakstar's breach of its obligations to Metro Concast arising from the MoA cannot be classified as a fortuitous event
under jurisprudential formulation. As discussed in Sicam v. Jorge: 

Fortuitous events by definition are extraordinary events not foreseeable or avoidable. It is therefore, not enough that the
event should not have been foreseen or anticipated, as is commonly believed but it must be one impossible to foresee or to
avoid.The mere difficulty to foresee the happening is not impossibility to foresee the same.

To constitute a fortuitous event, the following elements must concur:

(a) the cause of the unforeseen and unexpected occurrence or of the failure of the debtor to comply with obligations
must be independent of human will;

(b) it must be impossible to foresee the event that constitutes the caso fortuito or, if it can be foreseen, it must be
impossible to avoid;

(c) the occurrence must be such as to render it impossible for the debtor to fulfill obligations in a normal
manner;and,

(d) the obligor must be free from any participation in the aggravation of the injury or loss.  (Emphases supplied)

While it may be argued that Peakstar's breach of the MoA was unforeseen by petitioners, the same is clearly not
"impossible" to foresee or even an event which is "independent of human will." Neither has it been shown that said occurrence
rendered it impossible for petitioners to pay their loan obligations to Allied Bank and thus, negates the former's force majeure theory
altogether. In any case, as earlier stated, the performance or breach of the MoA bears no relation to the performance or breach of
the subject loan transactions, they being separate and distinct sources of obligation. The fact of the matter is that petitioners' loan
obligations to Allied Bank remain subsisting for the basic reason that the former has not been able to prove that the same had
already been paid  or, in any way, extinguished. In this regard, petitioners' liability, as adjudged by the CA, must perforce stand.
Considering, however, that Allied Bank's extra-judicial demand on petitioners appears to have been made only on December 10,
1998, the computation of the applicable interests and penalty charges should be reckoned only from such date.